Increased Social Security payments – Larger amounts for these retirees in 2025

Social Security recipients eagerly await the annual cost-of-living adjustment (COLA), which helps offset inflation and preserve the purchasing power of their benefits. The official COLA for 2025 won’t be confirmed until the Labor Department releases September’s Consumer Price Index (CPI) data on October 10th. However, The Senior Citizens League, a prominent advocacy group, predicts a modest 2.6% increase in benefits for 2025. If this prediction holds, it will be the smallest COLA since 2021, but it will still mean a noticeable increase in retirees’ Social Security checks, particularly in states with higher average benefits.

PIA

The amount a retiree receives from Social Security hinges on their Primary Insurance Amount (PIA), which is calculated based on their highest-earning 35 years. The PIA serves as the foundation for determining a retiree’s monthly benefit. If a worker retires at their full retirement age, they receive 100% of their PIA. However, claiming benefits early reduces the amount received, while delaying benefits past full retirement age increases the monthly payment.

The PIA is adjusted each year to reflect inflation, ensuring that Social Security benefits keep pace with rising costs. This adjustment, known as the COLA, is crucial for retirees relying on Social Security as their primary income source.

Social Security Benefits

Geography indirectly influences the Social Security benefits a retiree receives due to variations in income levels across states. According to the Social Security Administration’s 2024 statistical supplement, here are the ten states with the highest average monthly Social Security benefits for retired workers as of December 2023:

These states have higher median incomes, leading to higher Social Security benefits for retirees. Because COLAs are calculated as a percentage of the current benefit, retirees in these states can expect larger increases in dollar terms than those in states with lower average benefits.

Expected Increases

If the anticipated 2.6% COLA materializes, retirees in the states listed above will see their benefits rise accordingly. For example, the median retired worker in New Jersey, currently receiving $2,100 per month, would receive an additional $54.60 each month, or $655.20 annually. In Massachusetts, with a median benefit of $1,946, the increase would be $50.60 per month, or $607.20 annually.

The size of the increase varies depending on the starting benefit amount, which is why retirees in states with higher average benefits will see more significant dollar increases even if the percentage increase is the same across the board.

Higher Benefits

The discrepancy in Social Security benefits across states largely stems from differences in median income levels. States like New Jersey, New Hampshire, Maryland, and Massachusetts have some of the highest median incomes in the nation, which translates into higher lifetime earnings and, consequently, higher Social Security benefits.

Another factor is migration. Some retirees relocate after retiring, often seeking areas with a lower cost of living. This can skew the average benefits in both the state they leave and the state they move to. For instance, states like California and Washington, D.C., which have high median incomes but lower average Social Security benefits, may see many residents relocate upon retirement, reducing the average benefit for those remaining.

Overall, the 2025 COLA will provide a boost to Social Security recipients, particularly those in states with higher average benefits. While the percentage increase may be modest, the dollar amount could make a significant difference in the financial well-being of many retirees.

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